Eco-labels are becoming important market based instruments torninfluence the behavior of consumers and industry In favor ofrnenvironmentally-friendly products. This study examined households'rnwillingness to pay (WTP) a premium for environmental attributes ofrnleather products in a hypothetical market. An eco-labeling scheme isrnused to differentiate leather products.rnData was collected using two-stage sampling. First purposive sampling isrnused to select two kebeles based on their relative distance from thernpollution source and polluted river. Next 300 households are selectedrnusing systematic random sampling.rnDescriptive statistics and an ordered pro bit model are used to analysernthe data set. The result revealed that the majority of the householdsrnagreed that environmental pollution caused by conventional leatherrnprocessing is a problem to the livelihood of the people. Besides, almost allrnrespondents acknowledged the importance of the shift of productionrntechniques from conventional to environmentally friendly productionrntechniques. With regard to eco-labeling scheme, almost all respondentsrnsupported the programme.rnAbout 75% of the respondents are willing to pay a premium for rnenvironmental practices. The results suggest that monthly Income,rnfamily size and location significantly affect willingness to pay.rnFinally, the findings in this study showed that there is a market for ecolabeledrnleather products. Therefore eco-labeling could be used as anrnimportant market instrument to complement mandatory laws andrnregulation for environmental protection.